Ford of Canada CEO Calls for Improved Scrappage Program

The program “is working, but it’s not having (that much) of an impact,” David Mondragon tells Ward’s in an interview. “We’re experiencing nothing like the U.S. or other countries (with similar programs).”

Ford of Canada Ltd. CEO David Mondragon supports a vehicle-scrappage plan similar to the programs implemented in the U.S. and several European countries.

Under Canada’s current plan, dubbed “Retire Your Ride,” consumers trading in their ‘95 or older model-year vehicle receive $300 cash or a rebate on the purchase of an ‘04 or newer vehicle. The rebate or cash also can be used toward a public-transit pass or membership in a car-sharing program.

In some Canadian provinces, consumers trading in a vehicle can opt for a $350 to $490 discount off a high-end commuter bicycle, as well as up to 15% off parts and services.

While Mondragon supports the program, he says “the dollars are minimal.”

The program “is working, but it’s not having (that much) of an impact,” Mondragon tells Ward’s in an interview. “We’re experiencing nothing like the U.S. or other countries (with similar programs).”

Retire Your Ride, a national program managed in partnership with the Clean Air Foundation and local not-for-profit groups across the country, began in January and is scheduled to run until March 31, 2011. According to the program’s website, 11,302 old vehicles have been scrapped to-date.

The U.S. “cash-for-clunkers” program has resulted in more than 180,000 sales since it launched July 27.

Mondragon says Ford and other auto makers are calling on the Canadian government to implement a more productive scrappage scheme.

“The government is looking at (launching) a stronger program,” he says, “and we’ve encouraged them to ensure it is robust, simple and easy to understand and execute.”

Prentice is “considering if Canada should follow other countries in offering consumers a substantial financial incentive to scrap their old vehicles for environmentally friendly transportation options,” she says.

Despite the absence of an impactful scrappage program, Ford has been outpacing the Canadian automotive market, Mondragon says.

Ford, which overtook Chrysler Canada as the country’s top-seller in June, reported a July sales increase of 47% vs. prior-year, while the industry as a whole saw deliveries decline 7%.

July’s sales results reflect a year-long trend. In the first quarter, Ford sales were off 15%, vs. 22% for the industry, while in the second quarter, the auto maker eked out a 2% sales increase compared with a sector-wide 17% drop.

“A lot of the (sales increase) is on the strength of new products and the fact they are resonating with consumers,” Mondragon says.

Leading sellers for the Blue Oval in Canada last month included the Ford Fusion and Mustang, up 48.2% and 44.6%, respectively.

In addition to sales gains, Ford has increased its market share rapidly, Mondragon says, noting the auto maker controlled 15.4% of the market in July.

“That’s up 3 basis points on a year-to-year basis,” he says. “That’s nine months of growth on retail and total share.”

According to Dennis DesRosiers, president of Toronto-based DesRosiers Automotive Consultants Inc., Ford is the only Detroit Three auto maker to pick up more than one point of share in Canada in 15 years.

Although Canada is not immune to the ongoing global recession, Mondragon says “it is more tempered” than the U.S. He predicts conditions will begin to improve in the fourth quarter and the industry will be “fairly flat” year-over-year.

And as the industry rebounds, Ford is poised for further success in Canada, he says, noting the auto maker’s dealer base now is right-sized.

“We’ve downsized our dealer base by approximately 23% over the last 10 years,” Mondragon says. “So we’ve already made a lot of difficult decisions over the last decade that our competitors are making now.”

Ford currently has 440 dealers in Canada, as well as 60 “satellite” locations.

“Right now, our dealers’ throughput is strong,” Mondragon says. “We have a good footprint in regards to retailers and it’s a true competitive advantage.”

Mondragon, who assumed his post last summer, says he is scheduled to meet next week with Jim Farley, Ford Motor Co. vice president-marketing and communications.

Farley last month took on the additional duties of leadership of Ford’s operations in Canada, Mexico and South America.

“He’s going to be a great asset and add a lot of strategic value,” Mondragon says of Farley.

Meanwhile, Mondragon says Ford management is scheduled to sit down with Canadian Auto Workers union leaders Sept. 8 to discuss the future of the auto maker’s St. Thomas, ON, Canada, plant that is scheduled to close in 2011.

The facility, which builds the aging Lincoln Town Car, Ford Crown Victoria and Mercury Grand Marquis, originally was slated to be shuttered in 2010 as part of the auto maker’s ongoing North American restructuring strategy.

“Prior to (the talks), it’s not productive to speculate,” Mondragon says of future plans for St. Thomas.

He also declines to provide details on the future product at Ford’s Essex Engine Plant in Windsor, ON, Canada.

Ford last year announced plans to launch a new engine program at the facility but did not divulge product details or timing.

Sources tell Ward’s the plant will produce a new fuel-efficient modular 5.0L 3-valve V-8, possibly for use in the next-generation Ford Mustang.

The 5.0L engine program, codenamed “Coyote,” could use components sourced from Ford’s Romeo, MI, engine plant, such as crankshafts and aluminum blocks.

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